How to calculate UAE end-of-service gratuity in 2026: step-by-step for limited and unlimited contracts

Why the 2022 reform matters

Federal Decree-Law No. 33 of 2021 (effective February 2, 2022) replaced the old Labour Law No. 8 of 1980 for federal private-sector employees. The biggest changes for gratuity:

1. All NEW contracts must be LIMITED (fixed-term, maximum 3 years renewable). Unlimited contracts can no longer be issued; legacy ones grandfathered.
2. Resignation under a limited contract used to mean partial gratuity. Under the new law, resignation after one year of continuous service pays FULL gratuity.
3. The 21-day-for-first-5 then 30-day-after formula is preserved, as is the 2-year basic salary cap.
4. Article 44 lists 11 specific employer-initiated termination triggers (gross misconduct, criminal behavior, false documents, etc.). If any of these apply, gratuity is forfeited entirely.
5. The old "30-day month" computation method has been replaced with calendar-day-based daily basic (monthly basic x 12 / 365).

For pre-February-2022 employees on unlimited contracts: your existing gratuity calculation rules remain unless you sign a new contract.

For expats with employment in DIFC, ADGM, or other financial free zones: the federal law does NOT apply. Each zone has its own employment regulations (DIFC Employment Law No. 4 of 2021, ADGM Employment Regulations) with different gratuity formulas.

The 21-day and 30-day formula explained

The headline math is straightforward. For each completed year of service:

• Years 1 to 5: gratuity for that year = 21 days x daily basic salary
• Year 6 onward: gratuity for that year = 30 days x daily basic salary

Worked example: Ahmad earns AED 12,000 monthly basic. He has 7 full years of service.

Daily basic = 12,000 x 12 / 365 = AED 394.52

First 5 years: 5 x 21 x 394.52 = AED 41,425
Years 6-7: 2 x 30 x 394.52 = AED 23,671

Total accrued gratuity: AED 65,096

Check the 2-year cap: 2 x 12 x 12,000 = AED 288,000. The accrued amount is well below the cap, so the full AED 65,096 is payable.

Pro-rating partial years: a partial year is paid based on completed months. If Ahmad had 7 years and 4 months, the additional 4 months adds 4/12 x 30 x 394.52 = AED 3,945.

The daily-basic method (calendar days, not 30-day months) is the official MOHRE method since 2022. Some old contracts still use the 30-day method which produces a slightly higher number; the difference is about 1.4 percent. If your employer uses the old method and pays you slightly more, that is your right under the contract.

Limited vs unlimited contract scenarios

Under the new law, all new contracts are LIMITED. But the resignation rules still differ from the legacy UNLIMITED contracts that survive for pre-2022 employees.

Worked example: same Ahmad as above (AED 65,096 accrued at 7 years).
If his contract is unlimited and he resigns: full gratuity (he is over 5 years).
If his contract is unlimited and he had 4 years: 2/3 x AED 65,096 = AED 43,397.
If his contract is unlimited and he had 2 years: 1/3 x the accrued amount = AED 6,201.

Under the new limited contract: 4 years resignation gives him FULL gratuity (no reduction). This is the most important reform employees should understand.

Article 44 misconduct: when gratuity is forfeited

Article 44 of the new labor law lists 11 specific reasons an employer can terminate with cause and forfeit the gratuity:

1. Adoption of false identity, nationality, or forged documents
2. Conviction by court of a final judgement for an offence involving honour, honesty, or public morals
3. Repeated absence without legitimate reason for more than 20 days in one year or 7 days in a row
4. Disclosure of secrets of the establishment that caused real damage or material loss
5. Damage to property or equipment, or breach of safety instructions, if intentional or grossly negligent
6. Repeated failure to perform main duties after written warnings
7. Drunkenness or drug intoxication at work
8. Assault on the employer, manager, or co-workers during or because of work
9. Reduced productivity not corrected despite warnings (with a 60-day correction period)
10. Engaging in any other employment in violation of the contract
11. Conviction of a misdemeanor or felony affecting the establishment

The employer must follow due process: written warning(s) (where applicable), investigation, documented evidence, and formal termination notice via MOHRE. Without proper procedure, an Article 44 dismissal can be challenged and converted to a regular termination, restoring full gratuity.

If you face an Article 44 dismissal you believe is unjust: file a complaint with MOHRE within 30 working days. If MOHRE conciliation fails, the case escalates to the Labour Court. Engage a UAE-licensed labor lawyer.

How to claim your gratuity step-by-step

1. Notice period: serve the contractual notice (typically 30 to 90 days). Both employee and employer must honor this.
2. Final settlement letter: ask HR for a written breakdown of your final entitlements: gratuity, accrued leave, last salary, any pending allowances or bonuses, deductions (notice shortfall, loans, asset returns).
3. Verify the basic salary used: the gratuity must be on basic salary only. If your employer is using a "total compensation" figure that includes allowances, you are entitled to the lower (correct) amount but the math should still match the 21-day-then-30-day formula on basic alone.
4. Sign the receipt only after verification: do NOT sign a "no further claims" release until the amount is correct and credited to your account.
5. Visa cancellation: the employer must cancel your residency visa with the relevant authority. Without this, you cannot exit or change employer cleanly.
6. MOHRE complaint if disputed: if you believe the amount is wrong, file a complaint via the MOHRE app or website within 30 working days. Free conciliation; if it fails, the matter escalates to the Labour Court. Typical resolution: 60 to 120 days.
7. End-of-Service Savings Scheme (DEWS / similar): if your employer enrolled you in a private savings scheme (Dubai DEWS, ADGM Save, NDC voluntary scheme), your gratuity sits in the scheme and is paid on exit per the scheme rules.
8. Don't forget the Wage Protection System (WPS): your gratuity payment must flow through the WPS to be official. If the employer pays cash without WPS, the payment is not recorded with MOHRE and you may struggle to prove it later.